The Albanese government said Nauru did not ask for a financial handout from Australia to avoid switching diplomatic recognition from Taiwan to China, after Taiwanese officials claimed the move was prompted by a budget hole left after the island’s asylum seeker processing centre was scaled back.

Pacific Minister Pat Conroy said Nauru gave Canberra advanced notice it was establishing ties with China, which leaves Taiwan with just 12 countries that diplomatically recognise it, including three in the Pacific.